Economic collapse under epidemic-induced lockdowns and its prediction: A coupled dynamics approach.

Abstract

The sudden outbreak of an epidemic poses a significant challenge to alleviating global poverty. To suppress the epidemic, governments impose restrictions on social and economic activities. While most studies discuss the indirect impact of social restrictions on disease and the economy, the effects of economic restrictions-such as workplace and business closures, workforce capacity limits, international trade and travel restrictions, and supply chain disruptions (collectively called economic lockdown)-exert a harsh impact on the economy, which remains largely overlooked. This study addresses this gap by proposing a novel coupled epidemiological-economic model integrating economic lockdown (EL) effects. The model reveals multi-stability varying EL stringency and country's economic status, highlighting a reciprocal relationship between economy and disease burden. Empirical support is provided through structural statistical equation analysis. Our findings show that while a minor stringency can destabilize a low-income economy, middle-income countries are also vulnerable to stagnation, potentially falling into a "middle-income trap" driven by economic lockdown. We explore early warning signals for economic collapse induced by EL stringency across different types of economies. Overall, our study provides critical insights for policymakers in both economic and public health sectors, underscoring the importance of balancing economic lockdown measures to prevent poverty and middle-income traps.